Mexico’s recent advances have been impressive

March 21, 2014 12:25
By Duncan Wood

The Daily Star

After the trilateral leaders’ summit in Toluca, Mexico, on Feb. 19, attention in North America focused once again on the impressive advances that have occurred during the first 15 months of the Enrique Pena Nieto government.

Regaining control of the presidency and the Congress in July 2012 after 12 years out of power, the Partido Revolucionario Institucional immediately set an ambitious reform agenda that would yield changes to the constitution in key areas, including education, labor, telecoms, elections and energy, in addition to major new legislation on fiscal and financial affairs.

Since then – as a result of coordination within the party, with other parties and with state-level governments – the PRI government has enacted more reforms than had been possible over the previous 15 years. Not surprisingly, this legislative success has greatly enhanced Pena Nieto’s reputation internationally, securing him the February cover of Time magazine with the polemical headline “Saving Mexico.”

Within Mexico, however, the president has suffered from low and declining approval ratings and is currently polling less than 50 percent in national opinion polls. His success in moving Mexico’s legislation has counted for little in the eyes of the general population as a result of disappointing economic growth, a continuing public security crisis due to organized and other crime, and general skepticism about the government’s commitment to implement the legislative changes already approved by the Congress.

That said, recent events may lead the public to re-evaluate the president and his government. The arrest of Joaquin “El Chapo” Guzman, the world’s most infamous drug lord, laid to rest the belief among many Mexicans that the government had entered into what Mexican academic and commentator Denise Dresser has called a new “pax mafiosa” with the cartels. The arrest was stunning, and though it will not slow the flow of drugs through Mexican territory to the U.S. market, it shows the government’s commitment to take on even the most powerful challengers to its authority across the country.

Perhaps even more encouraging was the congressional passage of secondary legislation following last year’s telecoms reform and the announcement on March 7 that the nation’s largest television company, Televisa, and largest phone company, Amarica Movil, were “dominant firms” in their respective sectors, and that the government may force them to reduce their market shares.

These two firms have generally been assumed to be untouchable. Televisa, owned by billionaire Emilio Azcarraga, has been closely linked in the Mexican public consciousness with President Pena Nieto, particularly during the president’s time as a state governor and during the election campaign in 2012.

America Movil, owned by the world’s second-richest man, Carlos Slim, has repeatedly resisted attempts by successive governments to limit Slim’s monopoly control of the fixed-line and cellphone business in Mexico.

The implementation of the secondary legislation and these rulings are encouraging signs for foreign investors interested in Mexico’s economy. Although growth remains slow, the government’s commitment to get its legislation right will raise expectations for the secondary laws currently being prepared after the constitutional reform of the energy sector was approved in December 2013.

These secondary laws will help determine foreign investors’ level of interest in the bidding rounds for oil contracts that are expected to take place in early 2015. The laws were expected in early 2014 and were required to be passed by mid-March, so their delay is inciting some anxiety among analysts and investors. The telecoms ruling should help to calm these worries.

Many challenges remain for Pena Nieto and his government. Sparking economic growth and lowering the unacceptable levels of violence in many areas of the country are the most immediate concerns. However, increasing transparency and accountability and strengthening the rule of law are longer-term challenges that must be tackled if Mexico is to enter a period of sustained growth.

Still, the government must prepare for midterm elections in the summer of 2015. Securing the legislative and regulatory environment is a prerequisite not only for improving investment, but also for increasing public confidence in the government’s economic management.

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